Domestic solar PV: practical for NZ?

This is a guest post by Jason Kemp of DialogCRM. It originally appeared at Jason’s blog last week, but I thought it deserved an airing here because it directly addresses many of the issues HT’s readers have been keen to discuss. With luck, this won’t be last time Jason’s work pops up at Hot Topic…

Many NZ consumers will be wondering if solar power for the home is a practical option. In simple terms despite New Zealand having mostly renewable energy our power costs to the home have continued to climb in the past few years despite low inflation. In real terms power costs have pretty much doubled for me in the last 4 years and some of that is due to changing power use but most of it comes from cost increases made by the lines companies and the electricity retailers.

“The price of power in New Zealand is more than 70% higher than in Australia and the United States. There is very little point switching power companies in the face of such high prices. Homeowners would be far better off switching to solar.”

I suspect having an unprofitable aluminium smelter sucking up huge amounts of power at a huge discount and a government hell bent on selling shares in power companies ( that we already own – double dipping anyone?) complicates the math on why NZ power costs are extortionate but having high power costs should incentivise us to investigate alternatives – shouldn’t it?The argument in favour of the Tiwai Point aluminium smelter deserves a separate post but since it is losing money -it could be closed down and the suplus energy would lower power bills.( 572mw contract and 1000 direct staff which is between 12-14% of NZ’s national output — see Brian Gaynor background on Tiwai energy use. )

In addition Brian notes that “Closure of Tiwai Point would lead to an oversupply of electricity for some eight to 10 years and affect industry profitability.” ( And stop the political benefit of the power company asset sales.)

Over a longer period of time the cost of PV (photovoltaic cells) has dropped dramatically and so has the cost of inverters and other related technology costs such as batteries.

“SOLAR energy currently provides only a quarter of a percent of the planet’s electricity supply, but the industry is growing at staggering speed. Underlying this growth is a phenomenon that solar’s supporters call Swanson’s law, in imitation of Moore’s law of transistor cost. Moore’s law suggests that the size of transistors (and also their cost) halves every 18 months or so.

Swanson’s law, named after Richard Swanson, the founder of SunPower, a big American solar-cell manufacturer, suggests that the cost of the photovoltaic cells needed to generate solar power falls by 20% with each doubling of global manufacturing capacity. The upshot is that the modules used to make solar-power plants now cost less than a dollar per watt of capacity.”

So in simple terms when we have the cost of power to the home rising and the cost of solar generation technology decreasing – the question is – where is the tipping point at which it makes sense for most homes to start (at least partially) generating their own power?

Australia has reached the point where some 20% of dwellings have some form of solar power capability. Part of the reason for that has been supportive government policies and actual “feed in tariffs” so that power generated and fed back into the grid is credited at an artificially high rate.

For consumers connected to the electricity grid, being able to feed back any surplus power for a credit and to then “draw down” on regular power allows supply to meet demand when for reasons of weather there is a shortfall.

This also avoids another large cost area which is a container load or shed full of expensive batteries and capacitors that I have used for “off-grid” systems. Avoiding the cost of lots of batteries is very useful as it reduces the entry level cost for a home solar power system.

Besides solar panels, an inverter ( like a switch that converts power to ac for the house) and a place to locate the panels what other costs are involved?

It turns out that locating PV panels on a roof is very practical but may involve roofing and other installation costs that can add thousands to the bill.

Consumers need to be able to connected to the grid and to be able to at least get credits to reduce power costs for any surplus. This may need to be supported by government policy as power companies probably don’t want to be reverse metering and “buying” power from thousands of households. Contact and Meridian do offer buy back deals but the real benefit here is now $ from sales but rather avoiding the about 25cents / kWh ( depends on tariff & local pricing)

More transparent costing on installation. Most sources quote roofing and other costs in the order of a few thousand so that needs to change. PV systems 2009 article on Brannz is out of date on costs but it does point out that “per watt installed costs” might be a useful indicator. I’d say we are much closer to $1 per watt for the PV part now so a 3kw system might be $3,000 + other costs which reflects back the “plug & play” costs mentioned in #1 above. One option for the installation process maybe to use the MySolarQuotes service to get 3 quotes and compare.

C21e Solar Electric Tiles and Slatesare used on the zero energy house. For anyone building a new house they should definitely look into those options as well as super insulation and other building techniques which would improve overall energy use.

To me it seems like sizing up a solar power system for the home is not as simple as getting a couple of PV panels and an inverter although that does sound very good. What do you think – Is solar power a practical option for New Zealanders ? Is this a topic we should keep a watching brief on?

Notes: from reading some of the comments on other stories it seems that just because PV prices are less than *$1 per watt doesn’t mean we can get that price in NZ yet. However with relatively high electricity costs (and rising) plus the cost and efficiency of PV panels improving those two trends look promising. From anecdotal evidence in NZ we are still paying around $2/watt pricing at best.

35 thoughts on “Domestic solar PV: practical for NZ?”

From further research over at http://www.whatpowercrisis.co.nz/products/ which is a company that offers the 2kwh system for $10k it looks like PV panels are about 50% of the cost but because of the “Swanson effect” mentioned by the Economist it seems likely that cost will keep going lower and might already be equivalent to 25% of the cost of a system. If so the NZ$10k system becomes $7.5 and all the payback numbers look even better.

If you pay 25cents/kWh (as I do) then Not paying that for a percentage of my power gives an immediate cost benefit. Unlike interest from a bank that is tax free as it is a cost avoided rather than income being earned.

It looks like more efficient PV & storage is developing very well and so improvements in those two areas will also improve the benefits.

Also John – retrofitting a house is not as effective as designing a new house. The zero Energy house in Auckland notes that it is possible to cover all but 3 months of the year now. That won’t be achievable for most but worth thinking about.

Thanks John – Yes you are right but the chance to avoid costs at other times of the year is very worthwhile now and getting much better for grid connected people. My objective was to see if solar generation for the home had reached a tipping point for NZ consumers and the short answer is yes.

Storage tech is where we still need more research & practical improvements

“Progress is particularly likely during 2013 in the field of flow batteries. These devices, hybrids between traditional batteries and fuel cells, use liquid electrolytes, often made from cheap materials such as iron, to squirrel away huge amounts of energy in chemical form. “Grid-scale” storage of this or some other sort is the second way, after Swanson’s law, that the economics of renewable energy will be transformed.”

When considering PV installation the first step should be to reducing the homes power consumption because what you are trying to do is save money. I bought a power monitor for $150 and have been able to reduce my consumption by 15% which was a good start. I buy electricity from Contact at @0.21 per unit and they will buy any surplus from me at $0.15 per unit..
Can I fund a $10,000 PV installation from a total bill of $1200 a year? The jury is still out on this one,
On the subject of NZ’s energy consumption we should be factoring in our fossil fuel oil bill. I believe we should be building more natural energy capacity and transferring our transport energy to electricity as much as possible. We have an abundance of natural energy resources and oil prices are very unstable.

I fitted a 3Kw solar system and my electricity bill last month (May) was $10.69. The solar system was the best investment I have made. $10K on the roof returns me 15% in savings and it is tax free. A good deal.

It’s obviously warmer in Kerikeri than Auckland.
I’ve been watching my 5 kW system with interest the last few days.
I’ve read that last Wednesday (28th) had the coldest May morning in Auckland on record at 0.9°C. I recorded -3.1°C on the lawn, -7.8 on the roof but 4.4°C air temp, not too different to the previous morning.

How did the PV system perform? The figures below represent 24 hrs from !8:00 to !8:00. so Wednesday begins Tuesday evening when we had a pile of vistors. All figures kWh. .

Most imports at night. I have not switched the mains to the Hot water heater yet full time but pick a sunny period and give a 1 to 2 hr boost, I’m trying to see how far I can get through winter without drawing on the grid for water heating but this is not always possible. Clearly there are winter days when generation does not match demand but I nevertheless expect this month to generate half as much again as we use. I thought i would have an electric car by now and make better use of the system but that appears to have fizzled – too many other electric cars have hit the market this year in China.

This has prompted me to have a look at my last account – essentially for spring last year – here in South Australia.

For a start let’s look at ‘extortionate’ pricing – 30.33c / kWh (apparently I’d never taken in the jump from 25c in! Hmmmm….)

For any electricity I buy in I’m on 100% wind (in the state with more than 20% of its energy provided by wind power) – the extra tariff for that used to be 5c, but it seems that post Tony Abbott’s economy wrecking ‘Great Big New Tax’ not only are we still trundling on well enough, but this extra tariff is now down to 2.8c. Woohoo!

Ah, but here’s where it gets interesting. We have a small – 1kW – system, but the early adopters advantage of 50.3c Net FiT.

So, now that I’ve finally drummed it into the heads of the other householders that they need to save any high-demand usage until the brave little system has finished doing its very best for the day, electricity bills for a household of 4 (5 during the entire bill period just mentioned) have been markedly non-terrifying, and occasionally non-existent.

The tariff subsequently fell to a still rather natty standard 44c, and if you got installation approval before the end of 2011, and still put your system in shortly, that’s what you’ll get.

But the current FiT for new newly/lately approved installations is a princely 16c. Bear in mind, of course, any installed system would be much larger (the scheme has been so successful that legislation had to be passed to stop people installing panels on old cow sheds and lean-tos in paddocks! And there’s now a 45kWh/day limit on net exports which gives you an idea of the sheer scale of some installations!)

But wait – after September this year, you’re on your own:

No feed-in tariff offered but you will be eligible to receive a minimum retailer payment from your electricity retailer

Ah, the generosity of the electricity retailers – truly the kindness of strangers…

Anyway – the FiT was a great success, across Australia but particularly here, to such an extent that, similarly to Germany, it fell away as it simply wasn’t necessary to incentivize installations anymore. Panels are now unremarkable components of all suburban landscapes – and beyond!

There is, however, still the federal small-scale technology certificate (STC) rebate to induce new installations. It all does my head in, but the curious can have a look here (as of October 2012)

We need a decent feed in tarrif in NZ but it would undercut the governments plans to sell power companies for a good price. However if they were offered a good deal to power a proportion of our transport it could work and we could reduce our oil import bill which in turn would help the balance of payments problem. Whose going to phone Bill English?

Complaints about feed-in tariff are common but I think some realism is needed too. To the power supply company, you should be just another generator. However, unlike other generators, solar power reverse feed are expecting the following privileges.
1/ To sell power at prices higher than bulk generator (a lot of people seem to think that should get retail price).
2/ To have a fixed rate for buy-back instead of current market rate
3/ To have a guaranteed purchase requirement. (wouldnt other generators like that).

A “decent feed-in” tariff can amount to a subsidy if the amount paid is more than competing generators get. Do we really want solar power subsidized? (I dont like any form of subsidy personally) and if so, why should the power supply company be paying it rather than government?

While the metering gets complicated I think feed-in should be the current 5-min market wholesale rate. That wouldnt be much when the hydro are spilling water (2c?) but home producers could make a killing in dry years.

While a feed-in tariff in NZ would be nice most of the concrete benefits come from users NOT paying for up to 75% of their power and that cost saving is effectively off retail rates. From the systems I’ve seen summer time generation looks to be in surplus whereas I would expect winter to be quite a bit lower so the net result

1/ Solar should be seen as something to be encouraged & so not just another bulk generator. It should be seen as a preferential generator.
2/ I would think most people would be happy with a credit similar to the rate they pay less maybe a small percentage for the lines fee. The network is effectively operating as a giant “battery” for when they need extra power in the winter and at night.
3/ Relative scale needs to be looked at here. According to EECA is every NZ home had a 3kw panel on the roof then this would equate to 25% of NZ’s residential energy needs each year. At present PV efficiencies and using the 3kw scale that seems a little low but guaranteed purchase on a percentage of that ( maybe 10-20%) would be quite low and so not a big risk. The reality is that a 3kw system might cover 75% of current electricity use so it is all relative.

We are generally lucky with hydro (except in dry years.) I would guess that with wind powered generation at about 600mw now we have a bit more resilience in the system. Dare I say it Tiwai Point is a huge drain on the grid and in dry years they should be switched off.

If you are worried about subsidies have a look at Tiwai point. By my calculations that costs NZ taxpayers hundreds of millions each year in lost revenue because their base price is so low. They pay roughly 5c/kwh when most of us pay 25c/kwh and more in some areas.

A relatively small change there could free up say $100-$300m to help improve solar and other renewable energy sources grow.

Last time I looked at the tidal general plant planned for the Kaipara harbour that was a $700m project mostly owned by Todd. Called Crest the plan there is for 200mw of generating power. Its not solar but is renewable and given its proximity to Whangarei and Auckland users transmission losses would be lower. It would also improve security of supply to the which might be desirable from a government policy perspective.

1/I would presume that you would encourage solar power since it is low carbon. So is wind, geothermal and hydro – all arguably more cost-effective but without subsidies. If the government is spending tax dollar to reduce emissions, then is a solar subsidy the most effective way to do that? I think subsidies end up being about picking winners and have a long history of failure. Better is to pick the loser – cost carbon at its true cost to environment and let normal market mechanism sort out the most appropriate alternative.

2/ this is dreaming. Sure I would like that but it makes no sense to a supply company. Such a price would be a subsidy as. Stick the numbers into a supply companies balance sheet to see that.
To do this, the government would have to pay the company for the feed-in tariff or have price of power raised.

The best reason to install solar is when it is economic to do so compared to other unsubsidized sources.

I do not have the numbers to comment with conviction on Tiwai and dont believe that government should be offering a subsidy to attract industry. However, I support the principal that bulk industrial users have a lower cost structure involved in their supply cf residential and thus are able to negotiate a lower price with their suppliers.

Make no error that I think solar is important and that I think we need to massively grow renewables (see the Sustainable energy for NZ series posted here in December, especially the solar chapter) to cover all our energy needs. PV will be economic for some now, solar hot water for almost all, and that in the future even more so, with our cars taking up the excess generation. Its just that I think the technology is not quite there yet.

Looking at EM6Live we can see (eyballing) around 75% of our current generation at this minute is renewable (mostly hydro + geothermal)
Wind at 9am was almost zero. Coal has been tracking wind output is terms of percentage, so most “non-renewable” energy is from gas

The NZ Renewables Strategy is 90% – this is a government target. According to some other numbers we were at 79% renewables but have come down a bit.

Between 1998 and 2007, the use of coal and gas to generate heat in thermal electricity generators increased by 47 per cent. This increase has contributed to a 68 per cent increase in greenhouse gas emissions from electricity generation over the same period.

Wind generation capacity is at 614mw which is a big jump. We have managed to swap from coal to gas which is great but I assume we want to replace coal entirely if we can.

On a more personal note the problem is that I pay 25cents / kwh at the retail end. Compared to other countries NZ power is relatively expensive and if I can generate my own the point of the post was that it is getting easier to get payback on this.

Thanks Phil – all good points. Since I wrote the original post I have discounted the feed-in tariff idea as MOST of the benefit from grid connected systems comes from cost savings.

I think we are heading for a tipping point. Other posts on this site and elsewhere have indicated that solar is at cost parity with other generating systems. There is a 154mw plant being built in Mildura that should be a good local example of what can be achieved by a power plant scale system when that is complete in the next year or two.

That system uses concentrators to get something approaching 40% efficiency which is roughly double the home PV systems that we have now.

Regarding Tiwai Pt they paid $318m for 625mw of power – (572 of that on a very low price.) In very rough calculations the power used there is worth more than $1b so that works out to a $700m discount or subsidy – which is what it is.

Slicing $100-200m out of that subsidy would help everyone.

The problem with Tiwai point even when it is only paying $318m for power it is making a loss so any price rises to them for a number of reasons.

Australia has set aside $1.6b for its solar flagships programme. New Zealand needs to do better and ( except for the Meridian share sale ) it should be a no brainer to redirect some of that hidden subsidy from Tiwai Pt.

625MW is not what they used every hour of the day. Looking at the usage from 2011, if they paid $318m for power, then it looks like they are paying around 7c per kWh for electricity. Given they are wholesale buyer – like the supply companies – this doesnt seem an outrageous price to me. Your supply company is paying between 3 and 6c for their electricity at the moment.

Doesn’t look like there’s going to be a shortage of sunlight here anytime soon! Australia just broke it’s previous record for a continental heat wave with 5 days in a row with average maxima over 39C – 39.2C 39.5C 39.3C 39.2C 39.7C.

And, you’ll excuse me for saying, that if you think this is all just an amazing coincidence, and ‘would have happened anyway’ without AGW, you’re a fool, and it’s only a pity the rest of us are stuck on the same planet as you…

I’m not sure what this has to do with Solar PV in NZ.
Anyway, we send out our thoughts for those in Aus suffering from the heatwave, as we do for the people of China suffering the coldest winter in 28 years.

Now, Andy, why don’t you sit quietly for a moment with your thinking cap on, and consider what might be causing the observed increase of regional temperature extremes, not to mention droughts and floods.

Thanks Andy – on topic is better. It would be great if one of the Solar installer specialists could answer your question. I did call one but they are still on holiday till next week. I would imagine that UPS, power conditioners and other surge protection devices may be needed on some systems. My best guess is that it is not the solar PV that is at fault but rather the particular setup with regards to filters and the like but would be good to know.

I’ll keep you posted – the people concerned run the local coffee shop. However, PV panels are electronic circuits that are exposed to the elements 24×7, and are expected to last 20 years or so in order to pay back the investment (at current rates).

The risk of failure needs to be factored in to any personal investment decision – at least insurance needs to be carefully assessed.

By the way, our area of South Canterbury suffers from frequent power outages due to electrical storms, so PV isn’t the only victim.

The UPS that I run my computer off made some alarming buzzing sounds during a recent lightning strike

Thanks Andy, I was talking to an engineer about PV reliability and concluded that some of the systems out there have not lasted as long as they should have. Given that the technology is improving and the costs are still coming down it does mean that conditions are favourable for warranty providers to fix or replace faults – I would have thought.

Based on current trends and prices for electricity it would seem that we are heading to a tipping point closer to 10 years for the payback cycle. If and when we reach that – even if one has to replace all or most of the PV panels at the 10 year mark that will be a lot less than the full cost.

From looking at pricing and other product sources around 50% of the cost of as NZ system is the PV panels so a 20% decline in those costs would get us to the 35-40% cost component that other countries have already reached plus an overall cost reduction improves the payback.

“625mw is their usage for the year”. Nope Mw is rate, MWh is usage and they do not use that. 610Mw is their maximum drawdown. From our calculations, Sustainable Energy, we worked it out at 4kWh/p/d in 2007 and closer to 3 in 2011. Whatever you think of the charges, they are a wholesale purchaser, just like your power supply company. In the middle of winter, the price will be much higher – 10-12c per kWh if not more in a dry year, and your company will be averaging as well as their other mark-ups and costs. I agree that the best reason to install solar will be if you can make it pay less than your retail rate, but I think you are too hard expecting Tiwai to pay Auckland retail rates instead of same as supply company. I think they probably still get power at very cheap rate but not the subsidy you claim.

Thanks for the clarification Phil. Either way they are Meridian’s largest customer and they use something like 15% of NZ’s power. Since starting 1971 it seems very likely that they have benefitted much more than other consumers. My main reason to mention them was that they should be put under the finance microscope as a way of identifying subsidies that might be redirected. But we are getting off topic.

Looking at the NZ electricity usage graph, demand goes up to about 70% above night minimum at 9am and stays fairly steady till about 7pm. This is only very roughly matched to PV output, which goes from sunrise to noon then back to sunset in a fairly peaky bell curve ( clouds permitting ). Winter is worse, as you lower and shorten the supply curve while demand, especially in the evening, goes up. This reduces the value of home PV to the wholesaler. Having solar panels that tracked the sun would even out production, but cost much more to install. If the main purpose was to cover home demand, but in a grid-tied system, it might pay to have the panels skewed round to the west, as most domestic demand is in the evening. Total production would be less, but more useful to the owner.
Regarding solar panel prices, I’ve heard that the Chinese are dumping panels on foreign markets because of oversupply at home ( the US government says so anyway ). Radical cost reductions in manufacture could still happen, but Google has pulled back from the ‘Renewables cheaper than coal’ target they had a few years back.

Thanks John. By way of comparison Australia has a daytime peak use pattern as that is when it is hottest and air conditioning is used the most.

The best reason for using PV in the home is to save $. For a grid connected system homeowners avoid the cost of batteries and what they want most is a way to store energy (or credits) to reduce overall power costs. That has minimal benefit to the network but a great deal of benefit for the homeowner. One factor which may change power use in homes is the rise of electric cars over the next 2 decades.

if you have a look at the Swanson’s law graph it shows a very large price drop from 1977 through to now. That kind of technology curve is fairly typical in the computer / electronics industry as manufacturing & sales volumes improve.

From talking with NZ suppliers of PV the going rate here is about $1.60/ watt for the PV panels and that includes a higher freight cost than for some other places. It is likely that PV costs will go lower as more systems are made.

Other tech changes to watch out for will be better efficiency. Some concentrator type PV now get up to 40% efficiency which is about double what regular PV does at present. They will be more expensive but if panels can be swapped out then same roof area will produce double. Battery technology is also improving and for some grid connected people (in time) maybe at least some local storage would be feasible and cost effective.